PNB Housing Finance Limited has informed the Exchange regarding 'Earnings Call Transcript for the quarter and nine months ended December 31, 2018'.
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28th January, 2019
The SSE Limited, Listing Department, Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai- 400 001
National Stock Exchange of India Limited, Listing Department "Exchange Plaza" Sandra Kurla Complex, Sandra (E), Mumbai- 400 051
Scrip Code: 540173
Symbol: PNSHOUSING
Dear Sirs,
Sub: Earnings Call Transcript
Please find attached herewith the transcript for 03 and 9M FY 2018-19 Earnings Call held on 24th January, 2019. A copy of the same is also available on the website of the Company i.e. https://www.pnbhousing.com /investor-re lallons/financials/
This is for your information and records.
Thanking You .
For PNB ey~mited
~--.
San jay Jaln Company Secretary & Head Compliance
..
..
Encl: a/a
Regd. Office: gth Floor, Antriksh Bhavan, 22 Kasturba Gandhi Marg, New Delhi -110 001 Phone: 011-23736857, E-mail: loans@pnbhfl.com, Website: www.pnbhfl.com CIN: L65922DL1988PLC033856
“PNB Housing Finance Limited Q3 & Nine Months FY'18- 19 Conference Call”
January 24, 2019
Participants from PNB Housing Finance:
Mr. Sanjaya Gupta Mr. Shaji Varghese Mr. Ajay Gupta Mr. Kapish Jain Mr. Nitant Desai Mr. Anshul Bhargava Mr. Sanjay Jain Ms. Deepika Gupta Padhi
Managing Director Executive Director-Business Development Executive Director-Risk Management Chief Financial Officer Chief Operations & Technology Officer Chief People Officer Company Secretary and Head Compliance Head - Investor Relations
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PNB Housing Finance Limited January 24, 2019
Moderator:
Ladies and gentlemen, good evening and welcome to the PNB Housing Finance Limited
Q3 & Nine Months FY'18-19 Conference Call. As a reminder, all participants lines will
be in the listen-only mode and there will be an opportunity for you to ask questions after
the presentation concludes. Should you need assistance during the conference, please
signal an operator by pressing '*' then '0' on your touchtone phone. Please note that
this conference is being recorded. I now hand the conference over to Ms. Deepika
Gupta Padhi. Thank you and over to you, ma'am.
Deepika Gupta Padhi: Good evening and welcome everyone. We are here to discuss PNB Housing Finance
Q3 & Nine months financial year ‘18-19 results adopted as per Indian Accounting
standard. With me, we have our leadership team represented by Mr. Sanjaya Gupta --
Managing Director; Mr. Shaji Varghese -- Executive Director- Business Development;
Mr. Ajay Gupta -- Executive Director- Risk Management; Mr. Kapish Jain - Chief
Financial Officer, Mr. Nitant Desai -- Chief Operations & Technology Officer; Mr. Anshul
Bhargava -- Chief People Officer; Mr. Sanjay Jain -- Company Secretary & Head of
Compliance. .
We will begin this call with the overview and performance update by the Managing
Director, followed by an interactive question-and-answer session.
Please note, this call may contain forward-looking statement which exemplify your
judgment and future expectation concerning the development of our business. These
forward-looking statements involve risks and uncertainties that may cause actual
development and results to differ materially from our expectation. PNB Housing Finance
undertakes no obligation to publicly revise any forward-looking statement to reflect
future events or circumstances. A detail disclaimer is on slide #2 of the ‘investor
presentation’ available on our website.
With that I will now hand over the call to Mr. Sanjaya Gupta. Over to you.
Sanjaya Gupta:
Thank you, Deepika. Good evening, everyone. Welcome all to our Q3 & Nine Months
Financial Year ‘18-19 Earnings Call.
Before I get down to business, I like to Wish Your Families and You a Very Happy,
Joyous, Healthy and a Meaningful New Year 2019.
The Third Quarter of the Financial Year ‘18-19 witnessed high level of volatility and
liquidity concern in the debt capital market particularly on short-term borrowings.
Anticipating the liquidity challenges that we have been speaking about during various
earning call over the last one year we maintained additional liquidity of INR 6,000 crores
as on 31st, December 2018. Having said so, our proactive approach of maintaining
excess liquidity in the balance sheet and operational rigor enabled us to operate in a
business as usual mode during Q3 of 2019. As a consequence during the quarter, we
disbursed loans worth INR 9,300 crores across products and business segments and
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PNB Housing Finance Limited January 24, 2019
cumulatively over INR 27,500 crores during the nine months period of the financial year
‘18-19.
On the Liability side, we raised over INR 22,500 crores during Q3 of financial year ‘18-
19 utilizing multiple avenues like ECB, NHB refinance, Deposits, Securitization via
direct assignment, Commercial papers, etc.
Among the recent borrowings of Q3 financial year ‘18-19 the pertinent ones are INR
3,500 crores of loan sanction from the National Housing Bank and INR 3,324 crores of
fresh ECBs. In this regard, we express our sincere gratitude to the National Housing
Bank for their trust and belief in the Company’s robust operation. Borrowings via
commercial paper was restricted to roll over of existing facilities. Hence, during the
quarter, the Company net borrowed long-term funds thus improving its ALM gap across
all buckets.
On the Deposits side, the Company continues to be the second largest deposit taking
HFC in the country. We strengthened our deposit franchise and have seen strong retail
confidence with 3,500 deposit applications in April of 2018 moving to over 9,000 deposit
applications in December of the same year. This is the robust and dependable engine
to mobilize low cost and sticky resources.
Let me now talk about the “Financial Numbers” for the quarter ending 31st December,
2018 and nine months of financial year ‘18-19. The figures are on a consolidated basis
and are compared with the same quarter during the previous financial year. During the
quarter, the Company registered healthy double-digit growth over Q3 of financial year
2017-18.
The net interest income was up by 35% at INR 558.2 crores and profit after tax was up
by 22% to INR 303 crores. The spread on loans for Q3 of 2018-19 is 256 bps and the
net interest margin is 306 bps. The Company also registered healthy double digit growth
during the nine months period of ‘18-19 over the same period of financial year 2017-18.
The net interest income was up by 30% at INR1,453.8 crores and profit after tax was
up by 38% at INR 811.8 crores. The spread on loans for the nine months period ’18-19
is 227 bps and the net interest margin is 285 bps. The gross margin net of acquisition
cost for the nine months period stood at 326 bps against 338 bps during the same
period of ‘17-18. The OPEX to average total assets for the nine months is at 69 bps
compared to 58 bps during the same period of the previous year. This includes
incremental ESOP cost of 3 basis points and employee cost of PHFL which is our
subsidiary that largely houses DST cost that was amortized under the IGAAP is 6 bps.
Further ongoing branch network expansion, the cost undertaken includes in the growth
expenditure. If you only consider our business as usual and exclude incremental ESOP
and PHFL cost, the OPEX to ATA is 58 bps. The cumulative ECL provisioning on 31st
December, 2018 is at INR 435.6 crores. In addition to the ECL provision, we have INR
156.5 crores as a steady state provision for unforeseeable macroeconomic factors. As
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PNB Housing Finance Limited January 24, 2019
a prudent management practice, we added INR 11 crores in this pool during Q3 of
financial year ‘18-19. The return on assets for nine months period ‘18-19 is 1.51%
compared to 1.56% during the same period of the previous year on average gearing of
9.19x against the gearing of 7.15x during the previous year for the same period,
resulting in an expansion of return on equity to 16.22% for nine months period of
financial year ‘18-19 vis-à-vis 13.28% for the nine months period of the previous year.
The closing net worth as per IND AS as on 31st December, 2018 stands at INR 7,162.2
crores.
Now let me talk about the “Business Performance.” During the nine months of the
financial year, we registered 14% increase in loan file logins compared to the
corresponding period of the previous financial year. The disbursements registered 13%
growth year-on-year at INR 27,518 crores vis-à-vis INR 24,455 crores during the nine
months period of the previous year. The assets under management registered a growth
of 38% to INR 79,727 crores as on 31st December, 2018. Geographically, West is our
largest market with 38% of assets under management followed by North and South at
31% each. We have limited presence in East with three branches; two in Kolkata and
one in Bhubaneswar which forms a part of the North zone.
The Company during nine months period of ‘18-19 securitized loans worth INR 5,800
crores through the direct assignment route. The total outstanding loans assigned
amounts to INR 9,019 crores as on 31st December 2018. Net of this assigned loans,
the loan assets are INR 70,717 crores as on 31st December 2018, representing a
healthy growth of 28% year-on-year. Housing Loans constitute 70% of assets under
management and non-housing loans constitute the balance 30% and is in line with the
business mix maintained in the previous several years.
In the Housing Loan segment, Individual Housing Loans constitute 57% and
Construction Finance for residential properties constitute 13% of the assets under
management. In the non-housing segment, loan against property constitute 16% of the
assets under management, lease rental discounting, non-residential premises loans
and corporate term loans constitute the remaining.
As part of our geographical expansion, 16 branches were made operational during the
nine months of this financial year, totaling to a three digit number of 100 branches with
presence across 60 unique cities. The Company also services its customers through
26 outreach locations. The Company also made two underwriting hub operational
during the period, totaling to 23 underwriting hubs as on 31st December 2018 catering
to the branches and the outreach centers of the Company. During the nine months
period of ‘18-19 out of the total individual housing loan disbursements about 23% by
value was in less than 25 lakhs category which can be termed as affordable housing.
With increase in our branch network in tier-2, tier-3 cities, we look forward to increasing
the contribution of the affordable segment in our individual housing loan portfolio. Part
of this portfolio also qualifies as priority sector or PSL, the portfolio which can be sold
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PNB Housing Finance Limited January 24, 2019
off to bank at clearly attractive price post attain the minimum seasonal requirement of
six months.
Gross NPAs as a per cent of the loan assets stands at 0.47% as on 31st December
2018 compared to 0.42% as on 31st December 2017. The gross NPA at AUM level is
0.45% as on 31st December 2018. In our Wholesale book, we have nil NPA as on 31st
December 2018 which is due to the stringent norms for customer selection, credit
underwriting and project monitoring mechanism.
On our resource profile, 30% is contributed by non-convertible debentures, 17% by
bank line, 17% by deposits, 12% by direct assignment which is securitization, 11% by
commercial paper, 7% refinance from the National Housing Bank and 6% to ECB.
On 9th of January 2019, India Ratings downgraded our NCD rating from AAA to AA+
Stable. The rating action reflects change in India rating approach whereby the credit
assessment is based on the standalone intrinsic credit profile of the Company
compared with the erstwhile approach where the rating agency has factored in the credit
strength of the sponsor Punjab National Bank. This change in the rating approach is in
light of the weakened credit profile of the sponsor as well as a stated intention to divert
its stake in the Company. No concern otherwise has been recorded by India ratings
with respect to financial performance and soundness of the business.
The capital adequacy ratio as on 31st December 2018 stood at 14.49% of which tier-1
capital is at 11.37% and tier-2 capital is at 3.12%. This is as per IGAAP and does not
consider the impact arising out of IND AS adjustment.
In line with our philosophy to enable the marginalized community in becoming capable
and self-reliant, we worked in the area of skill enhancement, day care centers,
education and healthcare under our corporate social responsibility program known as
“Saksham.”
As an update to the stake sale, we received a joint letter on 13th November 2018 from
PNB and Quality Investment Holdings (QIH), the Carlyle Group, informing about QIH
decision to withdraw from the joint sale process. On the same day we received another
letter from the Punjab National Bank on their intention to independently sell the stake in
the Company. The process is currently underway.
With this, we would now open the floor to the question-and-answer. Thank you very
much, everyone.
Moderator:
Sure, thank you very much. We will now begin the question-and-answer session. The
first question is from the line of Nidhesh Jain from Investec. Please go ahead.
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PNB Housing Finance Limited January 24, 2019
Nidhesh Jain:
Two, three questions. First is how one should look at spreads given that we have done
huge amount of securitization/assignment in this quarter. So on a like-to-like basis, how
is the spread movement, we would not have done assignment this quarter?
Sanjaya Gupta:
I will answer one-by-one, so I will give you all the time. Securitization is the business as
usual for the Company and we have been maintaining at about 10% of our total assets
will be securitized year-on-year and this year in the beginning we have indicated that
figure is at about INR 7,000 crores, as of now we have done net secuitization of about
INR 5,100 crores. So, we have headroom of about INR 1,900 crores for Q4. We make
sure that we do a very balanced securitization of the pool which has home loans and
LAP both so that the product mix in the retail segment does not go haywire. So to say
in the future what are we going to do ( +/-2%) as I keep saying. We have large
operations. We will maintain 10% portfolio via the direct assignment route and this just
been now done on a quarter-on-quarter basis, so it is not that Q3 had some amount of
securitization, so Q4 will not have, it is now business as usual. So not to worry on that
count.
Nidhesh Jain:
But just to understand the spread trends…?
Sanjaya Gupta:
Because of IND AS, you upfront the spread for the life of the loan and add it your interest
income. If that was not the case, if you want to know that figure, it is about 1.95% of the
entire portfolio. You should recollect that the portfolio which will be securitized is the
vintage portfolio which is at a higher sort of spread.
Nidhesh Jain:
Secondly on OPEX to asset ratio, how one should look at that number?
Sanjaya Gupta:
Now, this is again an impact of the IND AS and I was also grilled by my board and they
have all the right and I was very well prepared. The impact is primarily because of two
reasons – In IND AS, the entire ESOP valuation gets upfronted. Now that has an impact
of about INR 28 crores in this financial year. And the other one is that all our direct sales
team used to be a third party as of the previous year which is now sitting on a subsidiary
Company. Now under IND AS, the fixed salary of these folks which are about 3,500
people cannot be amortized, only the variable component can be amortized and that
has an impact for the nine months period of about INR 32crores. Now, if you summate
both of them they will be about INR 60 crores. And if you minus that INR 60 crores from
INR 415 crores, then you will be left with something like INR 355 crores. And if you
compare INR 355 crores like-to-like with INR 270 crores, the upside of the OPEX is not
47% but it reduces to about 30%. And if you want to convert this to OPEX to ATA it will
be somewhere around 58 bps, which is as good as anybody else. And also in the CIR,
it will move from 21.1% to something that 17.7% if you do the same math there. So it is
because of the accounting law or the regulation and the change which has brought
about this increase both in OPEX as to ATA and in CIR.
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PNB Housing Finance Limited January 24, 2019
Nidhesh Jain:
Thirdly on the line item net gain on fair value changes which is around INR 52 crores
for this quarter, so should we include that in net interest income, is it on investment
portfolio that we are running and it will be very volatile QoQ?
Sanjaya Gupta:
These are basically Mutual funds and liquid funds, so not to worry on it.
Moderator:
Thank you. The next question is from Ronak Raichura from Asian Market Securities.
Please go ahead.
Ronak Raichura:
Sir, I wanted to know what is your two year lagged gross NPA?
Sanjaya Gupta:
Two year lagged gross NPA is an annual exercise and it is not a quarterly exercise. So
if you see as on March our two year lagged NPA were at about 0.67% vis-à-vis the
industry of 1.6%, and that delta spread is only increasing, and I think the same story is
going to remain as of 31st March 2019.
Ronak Raichura:
So you are saying that we will be much lower than the industry?
Sanjaya Gupta:
Yes and that is why the operational rigor especially when there is a slowdown and I
shall not be saying this but there is a liquidity sort of crunch, gate keeping and
monitoring have become bigger role than what it used to be. And I am very hopeful that
we will come back to a sterling two-year lagged comparison when CRISIL comes back
to its annual exercise.
Ronak Raichura:
Sir, the second question is got to do more with what is the outlook on the real estate
segment because real estate typically is a very levered business and because of the
liquidity crunch from the NBFC as well as the cost of funds rising, there will be some
kind of a slowdown in the real estate segment as well?
Sanjaya Gupta:
I am not so much concerned and I have been maintaining this over the last one year.
On the yield curve movement because the bench rate looking at the sentiment and the
inflation, the CPI, etc., I think the bench rates are going to come down, but the spread
is going to increase because of the fear of credit default. Now, hence the effective rate
of interests are not going to come down. What we have to be really looking very carefully
is the liquidity which is the blood line of real estate per se or the build environment. That
I think the regulatory authority, the government and all should be taking care of to make
liquidity their priority and not the rate of interest.
Ronak Raichura:
You just mentioned that the gateway keeping has become very important aspect of
lending now. So, obviously most people are cautious and therefore are disbursing
lesser. Is that so even with us?
Sanjaya Gupta:
We have not disbursed lesser in comparison to Q2 of this financial year, in fact, we had
11% higher, On a 9 month basis, we are a good 13% higher than the same period of
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PNB Housing Finance Limited January 24, 2019
the previous year. If you remember Q3 of ’17-18 was a sterling quarter for us where we
have done two large LRD transactions amounting to something like INR 1,680 crores. I
had told the investment community or the analyst community that, that quarter is an
aberration, do not take it as business as usual. Even if you were to compare from Q3
of the previous year to Q3 of this year, we are having a positive growth. So I am not
saying that because of gate keeping the disbursements, the business has turned down
but the business processes or the rigors are more than in a BAU situation.
Ronak Raichura:
Actually, there is no stress as such, I mean, you are saying the wholesale gross NPA
is zero. Our book is very-very robust.
Sanjaya Gupta:
I think the wholesale business has become a phobia and there is a fear psychosis
behind it. As a person, as a veteran in the industry for the last 32-years, take my word,
if wholesale credit hypothetically become zero, your retail will be first belly up than
wholesale because the developers will not construct hence on the sold inventory they
will not be able to raise new demand, hence the interest servicing will be jeopardized.
If they do not construct, they will not be able to sell. Retail business is a rich man’s
hobby. Till you do not have the right mix in a large portfolio between corporate finance
and retail, that is open challenge which I throw to everybody. Have large operations of
this magnitude only retail and give me an ROE of +18%. First of all, reach this scale by
doing only retail. Which good developer will let a lender even come inside? What is our
purpose, what is our relevance in the economy? We are making the supply side more
versatile. And if we do not form the supplier side so where will the demand come, it will
be just inherent demand, it will never fructify.
Moderator:
Thank you. Our next question is from the line of Bhaskar Basu from Jeffries. Please go
ahead.
Bhaskar Basu:
Just a couple of housekeeping questions, firstly on the incremental yield, could you kind
of share what your incremental yields are?
Sanjaya Gupta:
Incremental yields are smarter than the previous ones and as a consequence of which
it is about a good positive of 10.01% for Q3 FY18-19 on the entire portfolio.
Bhaskar Basu:
And if you can get a breakup.
Sanjaya Gupta:
Incremental yield for HL is at 9.30%, CF is at 11.67% and NHL is 10.67% including LAP
at 10.55%
Bhaskar Basu:
Just to get in perspective for the current quarter obviously the quoted yield is at 10.77
has been distorted because of the assignment income. So what would be the like-to-
like underlying.
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PNB Housing Finance Limited January 24, 2019
Sanjaya Gupta:
So, that is what I said, assignment is going to be business as usual, assignment is going
to be a source of funds like deposit.
Bhaskar Basu:
And also just to get a perspective of the growth, so we have the numbers for AUM, can
we kind of get the growth numbers on an AUM basis for this quarter?
Sanjaya Gupta:
As I keep saying my AUM will grow, we are not working in vacuum at about 1.5 to 1.75
of the industry average.
Bhaskar Basu:
No, basically for this quarter, for the various segments.
Sanjaya Gupta:
Well, Bhaskar, we will maintain a very-very judicious mix and we are not going to
change our product mix or our segment mix at all. And we have not done it in the last
28 quarters, I do not expect that we will do it in this quarter.
Moderator:
Thank you. Our next question is from the line of Nishchint Chawathe from Kotak
Securities. Please go ahead.
Nishchint Chawathe:
Two things, just one clarification, did you mention that your NIM which is at around
reported NIM of 3.06% becomes 1.95%,
Sanjaya Gupta:
No, it is not NIM, it is the spread.
Nishchint Chawathe:
So the spread which is at around 2.56%, that is reported, becomes 1.95%, I think that
is what you mentioned.
Sanjaya Gupta:
No, that was on the incremental business, it is not that 2.56% has got 60 basis points
impact of securitization, it is not that. The corresponding number is 2.27%.
Nishchint Chawathe:
Sure. So had you not done the securitization you would have been 1.95% versus
2.27%, that is what you are saying?
Sanjaya Gupta:
Yes, for the nine months period, correct.
Nishchint Chawathe:
Sure. Just two things, wanted your commentary on what is really happening with real-
estate developers? And what are you really seeing at the ground level in terms of some
of the other players slowing down and how is that really affecting the business? And
how are the banks responding in this environment?
Sanjaya Gupta:
See, one is, totally what we are seeing is there is a change of gears amongst the
developer community. So, I think we have been wishing for pan-India brands to emerge.
I think within a passage of 18 to 24 months we will have about 25-30 brands across the
country which will be worth sort of investing in. And the model which is going to emerge
is not the development or the DM model, but is the joint development model or the JD,
as we call it in our parlance, where the developers will be putting their skin in the game
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PNB Housing Finance Limited January 24, 2019
in the project rather than just working on revenue sharing. So, I think thanks to RERA,
demonetization and tightening of the liquidity that this consolidation is becoming more
and more visible. Obviously, we will have to even on the retail front and I keep saying
that retail can become more dangerous because of the operational rigor. So if today I
have about 177 unique corporates in my corporate finance book, I have 2 lakh unique
customers in my retail book. Now, you just imagine how horribly high the rigor and the
operational girth will be required if these people start behaving in a different fashion
than what they have been behaving till now. So, it is I think worth a wait and that
wholesale or corporate finance should continue to sort of even moderate the stress on
the retail part. And as I keep saying, gate keeping has become more and more
significant, it is consuming more of our time, operational robustness, digitization,
enterprise system solutions, robust standard operating processes, up-skilling people,
keep on modernizing technology is the way forward. Because gate keeping has become
significantly more important than just risk bind or risk purchase. And we have kept away
from category B and C developers, now B and C we internally classify them. And I think
going ahead we will have to only focus on A category type of developers who would be
emerging as the pan-India players.
Nishchint Chawathe:
And on the retail side, competition in terms of some of the players slowing down, how
are really private banks kind of… so basically some of the NBFCs who still continue to
do well, some are slowing down, and the role of private banks at this point of time?
Sanjaya Gupta:
That is the truth of life, you know it as well as I know it. And that is what I say, and you
people have been asking me in various investor conferences what are your fears? And
I keep repeating 3Ps, my people; my peers, I wish them all the very best; and the press.
Moderator:
Thank you. Our next question is from the line of Alpesh Mehta from Motilal Oswal
Securities. Please go ahead.
Alpesh Mehta:
Sir, first question is on the corporate term loan book which is of almost INR 3,600 crores.
Can you just throw some light on that, please?
Sanjaya Gupta:
Okay, so these are 100% secured loans. The security value or the DSCR in the credit
parlance will be at least 1.5x and the repayment of these loans are through earmarked
escrowed cash flows of very marquee brands, I cannot reveal the brands. And let me
assure you, this is a very safe bet. The only difference between a CTL and CF is that
CTL is like a working capital, it is fungible at a hold co level, not at a project SPV level.
So, it is a more robust and these are basically listed and highly rated companies.
Alpesh Mehta:
On the slide number #41 when we have given some details about the CTL wherein we
have given the ratio of residential and commercial of 62:38, so what is that.
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PNB Housing Finance Limited January 24, 2019
Sanjaya Gupta:
Yes, when we say commercial these will be basically corporate houses of these
marquee brands, their own offices, their commercial buildings which are occupied by
marquee tenants, those type of commercial buildings.
Alpesh Mehta:
And second question is on the average gearing, now we have reached almost to 9.2x,
what would be the comfort level from the management in terms of regulatorily obviously
you can increase significantly from here also, but just what is the ballpark range that
you are looking at?
Sanjaya Gupta:
Yes, basically I will maintain it at about 11x is when we start preparing for the next
capital raise. And by 12x-13x we will have the capital inside the Company. Even at the
IPO level we were geared at about 15x.
Alpesh Mehta:
And when we talk about the gearing of 11x or 12x, 13x, do we include the off-balance
sheet AUM or it is only on balance sheet?
Sanjaya Gupta:
No, it is only on the portfolio on balance sheet.
Moderator:
Thank you. Our next question is from the line of Mohan Pradeep who is an individual
investor. Please go ahead.
Mohan Pradeep:
I just wish to know regarding the stake sale process. Will this end by this financial year?
Sanjaya Gupta:
See, we are not running the process, Mohan, PNB is running the process. The way they
are doing it, it looks by the end of this financial year they would be done and dusted.
But I cannot give you a commitment, I am not running the process.
Moderator:
Thank you. Our next question is from the line of Pravesh Kochar from Blackstone.
Please go ahead.
Pravesh Kochar:
I just had one quick housekeeping question, the income that we have recognized on
assigned loans this quarter of INR 152 crores, that corresponds to INR 2,700 crores of
securitization, is that right?
Sanjaya Gupta:
Its on entire INR 5,800 crores.
Pravesh Kochar:
And last quarter for INR 3,100 crores we recognized INR 62 crores, so is there an
increase in spreads this time or how does that work?
Sanjaya Gupta:
Yes, there is so. So, you are right, INR 115 crores that belongs to this quarter
assignment has got about 50% home loans and 50% retail LAP.
Pravesh Kochar:
So if you could just throw some light on what is the spread we have received on these
assigned loans versus last quarter?
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PNB Housing Finance Limited January 24, 2019
Sanjaya Gupta:
See, it is not a single transaction, these are multiple transactions with multiple buyers.
And they are different segments, they are different vintages and they are different
products. So, it would be very difficult to say one number.
Pravesh Kochar:
And for these calculations you assume an average tenure of what, 7, 8 years?
Sanjaya Gupta:
So, as I am saying it will depend on the months on book, on products and on segment,
because the behavior change with product, segment and vintages.
Moderator:
Thank you. Next, we have a follow-up question from the line of Ronak Raichura from
Asian Market Securities. Please go ahead.
Ronak Raichura:
Sir, my question is, I wanted to understand the rationale behind the restriction of the
assignment to 10% of our portfolio? So, if it is ROE accretive why wouldn’t we want to
do more assignments?
Sanjaya Gupta:
It is a self imposed sort of a restriction, like in the wholesale we keep saying that the
wholesale book, plus/minus 2% will be around 20% of the total portfolio. So these are
just good housekeeping questions.
Ronak Raichura:
So, is there a rationale behind it?
Sanjaya Gupta:
Yes, the rationale is obviously that the rating agencies also feel comfortable if you are
not going berserk on your assigned pools, because then from an HTM lending institution
you become a warehousing Company.
Ronak Raichura:
Correct, it is like a semi-DSA.
Sanjaya Gupta:
Yes, you are just an aggregator, you mature the portfolio and sell it off and you become
a servicing agent. If you have worked is in the US market this is the model.
Ronak Raichura:
Sir, my second question is, we are saying that we will be looking to raise further capital,
we will prepare ourselves at around 11x gearing. Sir, it will impact also our borrowing
capacities and our rates, because higher the leverage the lesser the banks would be
willing to further lend you, right.
Sanjaya Gupta:
Okay. Now, our business process reengineering only started from 2012. And in 2016
we were geared at 15x and our IPO was well received and was the best IPO of the year.
And in that year we had the maximum growth also. So, if your operational robustness
over the period of time has been demonstrated well, the lending institutions do not raise
an eyebrow just because of the lever.
Ronak Raichura:
But sir, I am just talking purely from what we are seeing from the market’s perspective,
because I understand it is not in your hands but PNB is trying to sell the stake and it is
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PNB Housing Finance Limited January 24, 2019
finding it difficult to find a buyer. So, I mean, wouldn’t that be an overhang saying that
okay in fact India rating has downgraded our credit rating primarily because of the
weakness of PNB and also non-identification of the new buyer. So, don’t you think that
further will impact our pricing when we plan to go for IPO? It will, right?
Sanjaya Gupta:
Okay. This was the Valentine’s Day gift of 2018 to us. And you will appreciate over the
last four quarters we have insulated the Company’s operations from this misgiving,
which is not our doing. And I do not think I am in a position to say they are not able to
locate, I mean, find a buyer. The Company is at its lowest valuation and I think the way
the management team has sort of again and again demonstrated manifest that the
Company is very robust, strong and is a national asset, so I do not think that prophesy
of yours is correct. And I can’t comment any further, because as I said, I am not running
the process.
Moderator:
Thank you. Our next question is from the line of Nidhesh Jain from Investec. Please go
ahead.
Nidhesh Jain:
Sir, last time when we spoke you had indicated that in the corporate accounts around
six to seven accounts are where you feel there is some sort of stress or some sort of
delay in payment. How is the situation right now in terms of number of accounts, has it
changed?
Sanjaya Gupta:
Yes, the number of accounts remain minus 1, one is cured and we are working on the
rest. And the remaining accounts, touch-wood, by grace of God are working in a very
robust and a sterling performance they are giving. So, I would say our attention towards
regularizing or curing these four, five accounts now has not gone enlarged over the last
quarter.
Nidhesh Jain:
And secondly on the fixed deposit there has been quite a good traction in this quarter,
what percentage of these deposits have come from online fixed deposit channel?
Sanjaya Gupta:
See, online we were doing fantastically well. And let me tell you, IBM this month is going
to have an award ceremony in the Silicon Valley in SF and this is an application which
is getting an award because this is one of the finest applications which have been
developed in partnership with IBM. Now, unfortunately the Supreme Court ruled against
e-KYC on the liability side and hence it had to be withdrawn. So, as of now the online
deposit application is not live, we have withdrawn it.
Moderator:
Thank you. Our next question is from the line of Sanjay Kular from Infopile India. Please
go ahead.
Sanjay Kular:
My questions are on the two sides, one is on NIM is a little bit under pressure for the
nine months, even vis-à-vis peers it has been quite low. Would you like to give some
outlook on that going forward? And secondly, what is our PPOP profits?
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Sanjaya Gupta:
I will take first the NIM question and then you can repeat the second part of it. See, The
PNB Housing Finance Limited January 24, 2019
gross NIM is at 326 which is very steady state, the net-NIM is at about 285. And that
has got compressed because of two reasons, one is obviously the lever which has gone
up by about 200 basis points. And the second thing is that we are carrying excess
liquidity of about INR 6,000 crores and that is an inventory holding cost which gets
reflected in the NIMs. So, I do not think that there would be further compression. And
not to worry, because it was very important for us to maintain business as usual and
not slowdown operations even for a day for a rupee. And that was our promise of the
leadership team to our teams on the ground. And we honored it like every other time
whenever we come across challenging situations. Because in a lending sort of a
scenario you should be more bothered about spreads rather than NIM, because then
you have the gross NIM which has the fee income part and net off, COA, etc. And if that
is positive of 300 basis points and all and you are able to control your OPEX, then it is
a safe bet that your ROTA will be anywhere positive of 1.5% and if you are levered well
you can be returning the equity shareholders 18%-19%.
Sanjay Kular:
Okay. Sir, other question is on the pre-provision profits, how much is that for this current
quarter vis-à-vis last quarter?
Sanjaya Gupta:
Pre-provision, we do not work, because provisioning is part of our life. I mean, in lending
institution you do not work on EBITDA concept at all. Because in a lending institution
you will have to have provisions, so we do not even look at it as a line item because if
we are lending we have to have provisions.
Moderator:
Thank you very much. That was the last question in queue. I would now like to hand
the conference over to Ms. Deepika Gupta Padhi for closing comments.
Deepika Gupta Padhi:
Thank you everyone for joining on the call. If you have any questions unanswered,
please feel free to get in touch with investor relations. The transcript of this call will be
uploaded on our website, i.e. www.pnbhousing.com. Thank you.
Moderator:
Thank you very much. On behalf of PNB Housing Finance Limited, that concludes this
conference. Thank you for joining us, ladies & gentlemen. You may now disconnect
your lines.
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